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Costs that have already been incurred and cannot be changed no matter what action is taken in the future are called Sunk Costs

Example: Paul is assembling his new home theatre system. He has spent 5 hours thus far and estimates he will complete the assembly in 2 more hours. Joan informs him he is doing it the hard way and describes a simpler approach which will take one hour to undo his work and re-assemble the system.

EA is an OSD MAIS required analysis in support of investment decision at early IT/ERP program concept phase MS-A with an update at MS-B decision.

EA is also required by the Army CoE in support of Military construction decision.

(MAIS) Major Automated Information System programs

AoA is an OSD MDAP required analysis in support of acquisition requirement decision at early program concept phase MS-A with an update at MS-B decision.

AoA is a formal and elaborate study that in addition to the program life cycle, often includes an operational model done by TRADOC for the Army ASARC and OSD DAB decisions.

(MDAP) Major Defense Acquisition Programs

BCA is an OSD MDAP required analysis at post production phase in support of Performance Based Logistics (PBL) Contractor Logistic Support (CLS) vs. organic O&S decision. Risk analysis is an essential component of BCA.

BCA term is often synonymous with CBA for non-PBL analysis.

CBA is an Army required analysis for all new and existing initiatives at resource decision forums with cost of $10M or more.

CBA for Army HQ decision is developed by the initiative advocate and reviewed by the CBA-RB . AMC and TRADOC also have similar process for their internal resource decisions.

The amount of dollars that would have to be invested during the base year at the assumed discount (interest) rate to cover the costs, match the revenues, or match the savings at a specific point in the future

Is a structured methodology used to identify alternative solutions to a problem, determine the costs and benefits of each alternative, define the appropriate decision criteria, and select the best alternative

Produces a strong value proposition – a clear statement that the benefits outweigh the costs and risks.

In any organization, “culture” is the beliefs and principles that guide the behavior of the people in that organization.

Example: The Army’s military culture is based on mission accomplishment, selfless service, valor, and dedication. These concepts establish the foundation for how Soldiers and Civilians go about their duties.

In a cost culture:

Cost is an integral part of every decision

Soldiers and Civilians strive to find better and more cost effective ways to operate the Army enterprise

Leaders at all levels engage in cost control and management activities, which are supported by talented cost staffs

Adjusting for inflation is a specific form of normalization, an adjustment intended to make a given data set consistent and comparable with other data sets

A frequent use of simple normalization is to adjust based on quantities. For example:

In a manufacturing process, COA 1 produces 17,000 widgets per year at a total cost of $33,765 and COA 2 produces 14,500 widgets at a total cost of $28,725. It’s difficult to evaluate these COAs unless we normalize by computing a unit cost, which shows us that COA 2, with a unit cost of $1.95 per widget, is preferable to COA 1, which has a unit cost of $1.99.

The effective mean, or expected value, of a measurable quantity is the sum of all possible outcomes multiplied by their corresponding probabilities

Example: if the cost of a new ground combat vehicle is judged to be $1.4M with 50% probability, $2M with 25% probability, and $1.2M with 25% probability, then the effective mean (expected cost) is $1.4M x 0.5 + $2M x 0.25 + $1.2M x 0.25 = $1.5M.

Example: if inter-theater transit time for a sustainment brigade is projected to be 5 days with 90% probability and 4 days with 10% probability, then the expected transit time is 5 x 0.9 + 4 x 0.1 = 4.9 days.

Example: Let’s say the cost to construct a building is expected to be approximately $3,000,000 if completed on time and every month delay in completion adds $23,000 to the cost, and every month the building is completed in advance saves $23,000.

There is a 20% chance the building is completed on time, a 20% chance of being one month late, a 20% chance being two months late, a 20% chance being one month early, and a 20% chance being two months early.

What is the likelihood of paying no more than $2,977,000 for the building?

$2,977,000 is the amount paid if the building is one month early. Thus, if we seek to pay no more than this, we must finish the building one month ahead of schedule (at the latest). In other words, we can finish one or two months early.

There is a 20% chance of being one month ahead of schedule, and another 20% chance of being two months ahead of schedule, so the answer is 20%+20%=40%

Some of the websites listed here require user accounts. In most cases, anyone with a dot mil address can obtain an account. You are encouraged to scan these sites and request an account to any site that you think will be useful to you. This will save time when you need to use any sites to support a CBA or other projects.